Capstone Announces New Life-of-Mine Plan & Mineral Reserve for the Cozamin Copper Mine, Mexico
Tuesday, Jun 02, 2009

VANCOUVER, June 1/PRNewswire-FirstCall/ --

- 8.1 Million Tonne Mineral Reserve Supports 8-year Mine Life Producing Average of 33 Million lbs of Payable Copper/Year

Capstone Mining Corp. (TSX: CS) today announced an updated life-of-mine plan ("LOM Plan") and mineral reserve estimate for the Cozamin Mine in Zacatecas State, Mexico. This LOM Plan incorporates the mineral resources in the San Roberto area announced on February 18, 2009 and is described in more detail in a Technical Report prepared by SRK Consulting (Canada) Inc. ("SRK") which will be available on Sedar shortly. All currency values referred to in this release are in US$ unless otherwise specified.

    

                        Cozamin Mineral Reserve Estimate
                        --------------------------------
    -------------------------------------------------------------------------
    Class                         Tonnes   Copper     Zinc     Lead   Silver
                                  (000s)     (%)      (%)      (%)     (g/t)
    -------------------------------------------------------------------------
    Proven                         1,606     2.02     0.97     0.44     76.9
    -------------------------------------------------------------------------
    Probable                       6,491     1.57     1.13     0.26     55.4
    -------------------------------------------------------------------------
    Total                          8,097     1.66     1.10     0.29     59.6
    -------------------------------------------------------------------------


"The updated mineral reserve estimate for the Cozamin Mine supports an approximately eight year mine life, a significant increase over that previously reported, even after a significant increase in mill throughput resulting from the completion of the Phase III mill expansion," said Stephen P. Quin, President & COO of Capstone. "The new life-of-mine plan for the Cozamin Mine demonstrates robust economic and a net present value of US$172 million at an 8% discount rate, assuming approximately current metal prices and silver prices capped at US$4 per ounce in accordance with Capstone's silver stream agreement. A number of upside opportunities have been identified that could result in a higher annualized rate of production, which we are working to crystallize."

Life of Mine Plan

The LOM Plan was developed from the mineral reserve noted above, excluding any inferred resources, based on a processing rate of 1,015,000 tonnes per year (a nominal throughput of 3,000 tonnes per day, adjusted down for availability). The LOM Plan was prepared by the operating staff at the Cozamin Mine and reviewed by SRK. The annual production profile is set out in the table below.

    
                Annual Production Profile for the Cozamin Mine
                ----------------------------------------------
    -------------------------------------------------------------------------
                   2009  2010  2011  2012  2013  2014  2015  2016  2017 Total
    -------------------------------------------------------------------------
    Milling
    -------------------------------------------------------------------------
    Tonnes (000s) 1,015 1,015 1,015 1,015 1,015 1,015 1,015   734   258 8,097
    -------------------------------------------------------------------------
    - Copper (%)   1.70  1.87  1.86  1.88  1.51  1.51  1.52  1.47  1.28  1.66
    -------------------------------------------------------------------------
    - Zinc (%)     1.22  1.12  1.07  0.98  1.04  1.02  1.11  1.18  1.34  1.10
    -------------------------------------------------------------------------
    - Lead (%)     0.51  0.45  0.38  0.34  0.19  0.15  0.17  0.16  0.16  0.29
    -------------------------------------------------------------------------
    - Silver (g/t)   72    72    70    68    53    51    48    43    38    60
    -------------------------------------------------------------------------
    Payable Metals (in millions)
    -------------------------------------------------------------------------
    - Copper (lbs) 33.1  36.6  36.3  36.8  29.4  29.5  29.8  20.8   6.4 258.6
    -------------------------------------------------------------------------
    - Zinc (lbs)   14.8  13.6  12.9  11.9  12.6  12.4  13.5  10.3   4.1 106.1
    -------------------------------------------------------------------------
    - Lead (lbs)    6.5   5.7   4.9   4.3   2.4   2.0   2.1   1.4   0.5  29.9
    -------------------------------------------------------------------------
    - Silver (oz)   1.6   1.6   1.6   1.5   1.2   1.1   1.0   0.7   0.2  10.4
    -------------------------------------------------------------------------
    Cash costs (US$/lb of payable copper)
    -------------------------------------------------------------------------
    Production (on
     site) costs   1.09  0.99  0.99  0.98  1.23  1.22  1.21  1.25  1.44  1.11
    -------------------------------------------------------------------------
    By-product
     Credits for
     Zn, Pb & Ag   0.41  0.35  0.33  0.30  0.32  0.31  0.31  0.32  0.38  0.33
    -------------------------------------------------------------------------
    Off site cost
     of Cu
     concentrate   0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32  0.32
    -------------------------------------------------------------------------
    Total Cash
     Cost          1.00  0.96  0.99  1.00  1.22  1.24  1.22  1.26  1.38  1.10
    -------------------------------------------------------------------------


Life of Mine Plan Parameters

The LOM Plan for the Cozamin Mine was developed based on the assumptions and parameters set out in the table below. The operating parameters were generated from recent operating performance achieved at the Cozamin Mine during and after the completion of the Phase III expansion. Capstone believes there are additional opportunities to further optimize these parameters, as discussed below.

    

                  Life of Mine Parameters for the Cozamin Mine
                  --------------------------------------------
    -------------------------------------------------------------------------
                                                        Unit        Value
    -------------------------------------------------------------------------
    Metal Prices
    -------------------------------------------------------------------------
    Copper                                              $/lb            2.00
    -------------------------------------------------------------------------
    Zinc                                                $/lb            0.70
    ------------------------------------------------------------------------
    Lead                                                $/lb            0.60
    ------------------------------------------------------------------------
    Silver(x)                                           $/oz            4.00
    -------------------------------------------------------------------------
    Recovery to concentrates
    -------------------------------------------------------------------------
    Copper in Cu concentrate                              %               91
    -------------------------------------------------------------------------
    Zinc in Zn concentrate                                %               65
    -------------------------------------------------------------------------
    Lead in Pb concentrate                                %               60
    -------------------------------------------------------------------------
    Silver in all concentrates                            %               74
    -------------------------------------------------------------------------
    Operating Costs
    -------------------------------------------------------------------------
    Unit mining cost                                 $/t milled        18.03
    -------------------------------------------------------------------------
    Unit processing cost                             $/t milled        12.99
    -------------------------------------------------------------------------
    Unit G&A cost                                    $/t milled         4.49
    -------------------------------------------------------------------------
    Unit cost total                                  $ millions        35.51
    -------------------------------------------------------------------------
    Capital Costs
    -------------------------------------------------------------------------
    Sustaining Capital                               $ millions         17.5
    -------------------------------------------------------------------------
    (x) Silver prices are capped at $4.00 per oz in accordance with the
        silver stream agreement entered into by Capstone in April 2007.


Economic Analysis Summary

Based on the LOM Plan and economic parameters summarized above, the economic parameters of the project are summarized in the table below.

    
                 Summary of Economic Analysis for Cozamin Mine
                 ---------------------------------------------
    -------------------------------------------------------------------------
                                                        Units       Amount
    -------------------------------------------------------------------------
    Metal Production
    -------------------------------------------------------------------------
    Copper in Cu concentrate                         Tonnes Cu       122,000
    -------------------------------------------------------------------------
    Zinc in Zn concentrate                           Tonnes Zn        58,000
    -------------------------------------------------------------------------
    Lead in Pb concentrate                           Tonnes Pb        14,000
    -------------------------------------------------------------------------
    Silver in all concentrates                         oz Ag      11,468,000
    -------------------------------------------------------------------------
    Life-of-mine
    -------------------------------------------------------------------------
    Revenue after 3% NSR                             $ millions          521
    -------------------------------------------------------------------------
    Operating costs                                  $ millions          288
    -------------------------------------------------------------------------
    Capital costs                                    $ millions           18
    -------------------------------------------------------------------------
    Economic Results
    -------------------------------------------------------------------------
    NPV at 0% discount rate                          $ millions          216
    -------------------------------------------------------------------------
    NPV at 8% discount rate                          $ millions          172
    -------------------------------------------------------------------------


Sensitivity Analysis

A sensitivity analysis was performed individually on metal price, metal grade, capital cost and operating cost. The results of this analysis are summarized in the table below.

    
                   Sensitivity Analysis for the Cozamin Mine
                   -----------------------------------------
    -------------------------------------------------------------------------
                                      Pre-tax NPV at 8% Discount ($ millions)
                                     ----------------------------------------
    Variable                           -20 %             0 %           +20 %
    -------------------------------------------------------------------------
    Capital Cost                         175             172             169
    -------------------------------------------------------------------------
    Operating Cost                       217             172             128
    ------------------------------------------------------------------------
    Metal Price                           90             172             254
    -------------------------------------------------------------------------
    Grade                                 90             172             254
    -------------------------------------------------------------------------


Risks and Opportunities

The principal site specific risks for the LOM Plan identified during SRK's review include the following:

    
    1. Ensuring a supply of water sufficient to sustain 3,000 tonnes per day
       over the long term. Capstone has a new water well in process to
       provide excess water capacity.

    2. Continuing to ensure that accurate drilling and blasting practices are
       maintained to minimize dilution, minimize secondary breaking and
       optimize extraction, with sufficient stopes developed ahead to allow
       flexibility in the event of problems with any particular stope.


The principal site specific opportunities identified in SRK's review include the following:

    
    1. Mine life may be extended by exploration on the under-explored 4
       kilometers of the Mala Noche vein successfully discovering and
       delineating additional mineral reserves outside of the existing
       mineral resource area, or by converting the San Roberto inferred
       mineral resources to mineral reserves, inclusion of the San Rafael
       mineral resources to reserves, or by Capstone acquiring existing
       claims which cover the down dip extension of the Mala Noche vein to
       the east of the current mineral reserve area. 

    2. Further review of the 31 drill holes omitted from the resource model
       (due to apparent survey issues) may result in an overall marginal, but
       locally significant, increase in mineral resources. For example, drill
       hole U62 (16.2 meters at 3.3% Copper) intersected significantly
       thicker mineralization than surrounding channel sample data in the
       drift. If, through resurveying or re-drilling (if necessary), this or
       other holes were reintroduced into the database, it may result in an
       increase in the overall mineral resource and reserve.

    3. Improved ore handing system in the shaft, which is currently in
       process.

    4. Enhanced 3D mine planning which should result in improvements in
       efficiencies for access development, stope design, dilution control
       and optimal recovery of the resource.

    5. Continued improvements in metal recoveries, concentrate grades and
       plant throughput. Steady improvements since the completion of the
       Phase III expansion show the potential to consistently exceed the
       life-of-mine assumptions used in the LOM Plan.


In respect of the latter point, the Cozamin mill has consistently exceeded design capacity since February 2009 and appears capable of sustaining higher throughput, which would increase the annualized rate of production, as well as higher recoveries and concentrate grades. Continued outperformance could result in a revision to the mine plan setting out higher production targets.

Mineral Reserve Estimates

The Cozamin mineral reserves were estimated using the mineral resource model provided by Robert Sim, P.Geo. of SIM Geological Inc. ("SGI"). The mineral reserve estimate was prepared by SRK under the supervision of Gordon Doerksen, P.Eng., a Qualified Person under NI 43-101. The mineral resource model was imported into Gemcom GEMS(TM) software. Mining shapes were created to define the limit of economic mining blocks from which mineral reserves were estimated. GEMS(TM) was used to interrogate the resource model and report material within the confines of the mining shapes. Mining recovery and dilution were calculated individually for each stope with due consideration given to the mining method. An economic NSR cut-off value ("COV") of $35 per tonne was estimated based on historical and projected costs developed from first principles. The basis for the COV came from budget operating costs of $18/t for mining, $12.50/t for processing and $4.50/t for general and administration costs. Metal prices used in estimating the COV were US$1.50 per lb of copper, US$0.50 per lb of zinc, US$0.45 per lb of lead and US$4.00 per oz of silver (the latter based on the silver stream agreement). Only measured and indicated mineral resource blocks were used in the estimation of mineral reserves. Inferred resources contained within a mining shape were assigned a grade equivalent to dilution. Dilution grades, including any inferred resource blocks, were calculated as the block grade factored down to 33 % of the block copper grade; 33 % of the block lead grade; 33 % of the block zinc grade; and 20 % of the block silver grade.

Technical Report

A National Instrument 43-101 Technical Report in respect of the matters reported herein will be filed on SEDAR, under Capstone's profile, within the next five days.

The TSX does not accept any responsibility for the adequacy or accuracy of this press release.

Quality Assurance

The technical information in this news release has been prepared in accordance with Canadian regulatory requirements set out in National Instrument 43-101 and reviewed by Stephen P. Quin, P. Geo., President & COO for Capstone Mining Corp., Bob Barnes, P.Eng. Vice President, Operations - Mexico with Capstone Mining Corp. and Gord Doerksen, P.Eng. of SRK Consulting (Canada) Inc., who is an Independent Qualified Person as defined by National Instrument 43-101 and is responsible for the mineral reserve estimate.

 

Source: PR Newswire

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